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Enron's Ex-Finance Chief Surrenders

Probe: U.S. prosecutors seek Andrew Fastow's cooperation in pursuing higher-ups at the firm.

October 03, 2002|EDMUND SANDERS and MEGAN K. STACK | TIMES STAFF WRITERS

HOUSTON — Andrew S. Fastow, the alleged financial mastermind behind the Enron Corp. scandal, turned himself over to the FBI on Wednesday to face criminal charges that he pocketed millions of dollars while orchestrating a maze of illegal partnerships and secret deals.

The development caps a stunning fall for Fastow, 40. Once one of the most respected chief financial officers on Wall Street, he has become a symbol of corporate greed.

Still unknown is whether Fastow will turn on his former bosses. The criminal complaint begins a dance between Fastow and federal prosecutors over whether he will attempt to bargain away some charges by offering to implicate former Enron Chief Executive Jeffrey K. Skilling and former Chairman Kenneth L. Lay. Fastow also could implicate Wall Street bankers who assisted in Enron's deals.

So far, Fastow has refused to cooperate with the government's probe of the fallen Houston energy giant, according to federal prosecutors.

By filing a criminal complaint and not moving immediately with an indictment, federal prosecutors are giving Fastow a last chance to cooperate, attorneys say. Under law, the government must file a formal indictment within 30 days. After that, it becomes much harder for both sides to cut a deal to reduce the charges against Fastow.

"This gives them a little more flexibility," said Eric Holder, a deputy attorney general during the Clinton administration. "The government is looking for cooperation from him as it attempts to work its way up the ladder."

Deputy Atty. Gen. Larry Thompson, who is part of a multi-agency Enron task force that includes the Securities and Exchange Commission, the FBI and the Internal Revenue Service, said: "Fastow and his co-conspirators systematically and thoroughly corrupted the business of one of the largest corporations in the world." The SEC filed its own civil complaint Wednesday against Fastow in U.S. District Court in Houston.

Thompson, speaking in Washington, alleged that Fastow siphoned $21 million in ill-gotten gains.

In a statement Wednesday, Fastow's attorney said his client was only doing his job, with the knowledge and approval of his superiors.

"Enron hired Andy to arrange off-balance-sheet financing," said John W. Keker, his attorney. "Enron's board of directors, its CEO and its chairman directed and praised his work. Accountants and lawyers reviewed and approved his work.... He never believed he was committing any crime."

Though Skilling and Lay were not named in the government's complaint, it accuses Enron's "chief executive officer" of making "false representations" to Enron's board about how transactions with Fastow were approved and how much profit Fastow was permitted to earn on the deals. Lay and Skilling each served as CEO during the relevant time periods, setting off a guessing game about which one was referred to in the complaint. Both have denied knowledge of any wrongdoing in the past.

Bruce Collins, an attorney for Lay, said he did not believe the reference applied to his client and that there was nothing in Enron board minutes or subsequent investigations that suggested that Lay misled his fellow directors.

"If anything, Mr. Lay was in the same position as the board," Collins said.

Skilling's attorney declined to comment.

Fastow ultimately could face as many as 45 years in prison, depending upon the ultimate charges.

If he does not cooperate, Fastow risks becoming the highest- ranking Enron officer to be charged in the case, and he probably would bear the brunt of the government's resources, attorneys watching the situation said. The threat of charges against his wife, who allegedly received kickbacks, also might be used by prosecutors to pressure Fastow, they added.

Enron filed for bankruptcy protection in December amid a wave of accounting problems and investor panic over the company's use of off-the-books partnerships to hide debt and boost profit.

Rather than the creative accounting methods or "gray areas" once described by Fastow to explain Enron's practices, the government's 35-page complaint alleges outright fraud, money laundering and deceit.

The partnerships, known as LJM, Southhampton and Chewco, were used by Enron to meet financial targets on Wall Street by moving money-losing investments, including a power plant in Brazil and electricity-generating barges off the coast of Nigeria, off its books, according to the complaint. In another deal, the government said, Enron used a Fastow-controlled partnership to disguise the company's interest in wind farms in California, thus enabling the projects to continue to qualify for certain financial benefits.

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